Tax Tip: The More Obscure Medical Expenses

Are you claiming all the medical expenses you or your clients might be entitled to? 

To the employment picture, things are looking up, according to Statistics Canada. In August, employment increased by 27,000, led by part-time work and among private sector employees. The unemployment rate edged up 0.1percentage points to 8.7% as more people participated in the labour market. However, since the start of this recession, Canadian unemployment has been less than in the US, which has lost approximately six million jobs since the beginning of their recession in 2008. According to Statistics Canada, since employment peaked in October 2008, total employment has fallen by 387,000 (-2.3%). The trend in employment, however, has changed recently. Over the last five months, employment has fallen by 31,000, a much smaller decline than the 357,000 observed during the five months following October 2008. Students aged 15 to 24 had a really tough summer, with an unemployment rate of 19.2%, which is the second highest rate since 1977. Will this increase student debt in the future? Should the government do more to help?   Give us your opinion: Participate in the Breaking Tax and Investment News Poll Women age 25 to 54 took up most of the increase in employment in August, and in terms of provincial gains, all provinces did well, with the exception of Saskatchewan, which had a notable decline in its employment rates. From an industry point of view, increases in employment were observed in a number of industries in August: retail and wholesale trade, finance, insurance, real estate and leasing. Losses arose in business, building and other support services, as well as educational services. For more information, you can view the full report by linking here.   Educational Resources: For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

September 5 Meeting of G20 Finance Ministers: But Canada Still in Good Shape for 2010 Recovery By Evelyn Jacks, President, Knowledge Bureau The meeting of the G20 Finance Ministers and Central Bank Governors took place on Saturday, September 5 in London, England. Their deliberations resulted in further steps to strengthen the world's financial system, in the context of recovery from the worst financial crisis since the Great Depression. See Recommendations For Robust Global Regulation And Oversight However, the significance of the meeting may extend beyond the establishment of rules for banking, lending, regulation, taxation and executive compensation in the G20 countries. It represents a continued exercise in world governance and co-operation, which at a macro level is ground-breaking and very interesting. See World Bank Statistics on Global Economic Recovery These continued efforts and focus of a new guard--a global team of chief stewards, working together within relatively new territoryóare impacting Canadians, as they contemplate their financial future, and potentially another election this fall. The G20 countries represent 85% of the world's economy, and their success in overcoming the financial crisis is critical to investors, business owners and employees everywhere. This weekend's meetings are also significant ahead of the next G20 meeting, The Pittsburg Summit, which occurs September 24th through the 25th, in Pittsburgh, Pennsylvania. At that event, US President Obama will meet with leaders representing 85 percent of the world's economy, review progress made in prior meetings, and discuss further required actions towards sustainable recovery from the global economic and financial crisis. So what does it all mean to advisors and their clients back home? While the International Monetary Fund, (IMF) in its April 2009 publication World Economic Outlook has stated that it expects Canada to experience the smallest contraction of all G7 countries in 2009 and the strongest recovery going into 2010, the reality is that as a trading economy, our recovery "is highly dependent on a sustained recovery in the global economy, in particular in the United States. The global economic recovery, in turn, cannot fully materialize until dislocations in global financial markets are fully resolved and these markets are fully functioning.î[1] See Canadian Fundamentals Are Strong, Yet Dependent on Others, Next Time: September 15th .  Therefore, the outcomes of the London meeting of the G20 Finance Ministers and Central Bank Governors and the implementation of these leader's ongoing recommendations within Canada, in the context of its position of strength and dependence on the success of its global trading partners, will need to be well understood by any future federal government. Investors, business owners and employees who are attempting to make decisions with their tax and financial advisors, will find the ongoing outcomes of these meetings insightful and potentially useful in envisioning their own opportunities for financial security. Knowledge Bureau will report on and analyze the details of the global economy and its recovery, the effects of new regulation and taxation, as well the risks and opportunities from a potential fall election on the Real Wealth Managementô of income and assets, together with 15 leading speakers and Canada's top advisors in the financial services, at its Distinguished Advisor Conference in Tucson, Arizona, November 8 to 11. Delegates may register by calling 1-866-953-4769. The London meetings build on the Lecce Framework for Common Principles And Standards For Propriety, Integrity And Transparency developed by the G8 Finance Ministers in Lecce, Italy on June 13, highlighted in our first Special Report on Fixing the Financial Crisis.     Evelyn Jacks is President of The Knowledge Bureau and author of over 40 books on the subject of personal taxation, finance and Real Wealth Managementô. She has recently been appointed by Finance Minister Jim Flaherty to the Task Force on Financial Literacy. [1] Canada's Economic Action Plan A Second Report To Canadians June 2009, Department of Finance, Canada RECOMMENDATIONS FOR ROBUST GLOBAL REGULATION AND OVERSIGHT By Evelyn Jacks, President, The Knowledge Bureau The G20 Finance Ministers agreed over the weekend that more needs to be done to regulate and oversee the financial services including prior commitments to strength and stability, propriety, integrity and stability and the following: Expansion of the mandate and membership of The Financial Stability Board (FSB) and the Global Forum on Transparency and Exchange of Information; More stringent capital requirements for risky trading activities, off-balance sheet items, and securitized products by financial regulators; Proposals to address operating principles regarding compensation and deposit insurance; The establishment of over thirty supervisory colleges. Now, six further actions were recommended: 1. The oversight of Corporate Remuneration and Accountability of Compensation Committees at Board Levels. Delivery of a framework on corporate governance and compensation practices, including greater disclosure and transparency of the level and structure of remuneration for those whose actions have a material impact on risk taking; global standards on pay structure, including on deferral, effective clawback, the relationship between fixed and variable remuneration, and guaranteed bonuses, as well as corporate governance reforms to ensure appropriate board oversight of compensation and risk, including greater independence and accountability of board compensation committees. "We call on the FSB to report to the Pittsburgh Summit with detailed specific proposals for developing this framework, which could be incorporated into supervisory measures, and closely monitoring its delivery. We also ask the FSB to explore possible approaches for limiting total variable remuneration in relation to risk and long-term performance. G20 governments will also explore ways to address non-adherence with the FSB principles.î 2. Stronger regulation and oversight for systemically important firms. 3. Stronger prudential regulation by, among other things, requiring banks to hold more and better quality capital once recovery is assured. "We call on banks to retain a greater proportion of current profits to build capital, where needed, to support lending.î 4. Tackling non-cooperative jurisdictions (NCJs): particularly those that fail to meet regulatory standards, and tax information exchange standards. The Ministers pledged to use countermeasures against tax havens starting in March 2010, possibly through a multilateral instrument. 5. Implementation of international standards, to prevent new risks, particularly with regard to credit derivatives, oversight of credit ratings agencies and hedge funds. 6. Convergence towards a single set of high-quality, global, independent accounting standards on financial instruments, loan-loss provisioning, off-balance sheet exposures and the impairment and valuation of financial assets. WORLD BANK STATISTICS ON GLOBAL ECONOMIC RECOVERY ONLY CAUTIOUS The World Bank predicts that while high income countries will return to positive growth in 2010, these economies will remain depressed well into 2011 and it is only after this that unemployment rates will decline. The "output gapî, the difference between the productive capacity of an economy and the actual level of demand, will likely have reached some 6 percent of GDP by then. See table that follows: The global outlook in summary, 2007-2011 Percent change from previous year, except interest rates and oil price     2007 2008e 2009f 2010f 2011f Global Conditions World Trade Volume 7.5 3.7 -9.7 3.8 6.9 Consumer Prices G-7 Countries a,b 1.7 2.9 0.5 0.8 1.3 United States 2.6 3.8 0.3 1.2 2.0 Commodity Prices (USD terms) Non-oil commodities 17.1 21.0 -30.1 -2.1 1.4 Oil Price (US$ per barrel) c 71.1 97.0 55.5 63.0 65.8 Oil price (percent change) 10.6 36.4 -42.7 13.4 4.6 Manufactures unit export value d 5.5 7.5 1.9 1.0 0.0 Interest Rates $, 6-month (percent) 5.2 3.2 1.5 1.7 2.0 €, 6-month (percent) 4.3 4.8 2.0 2.2 2.3 Real GDP growth e World 3.8 1.9 -2.9 2.0 3.2 Memo item: World (PPP weights) f 5.0 3.0 -1.7 2.8 4.0 High income 2.6 0.7 -4.2 1.3 2.4 OECD Countries 2.5 0.6 -4.2 1.2 2.3 Euro Area 2.7 0.6 -4.5 0.5 1.9 Japan 2.3 -0.7 -6.8 1.0 2.0 United States 2.0 1.1 -3.0 1.8 2.5 Non-OECD countries 5.6 2.4 -4.8 2.2 4.6 Developing countries 8.1 5.9 1.2 4.4 5.7 East Asia and Pacific 11.4 8.0 5.0 6.6 7.8 China* 13.0 9.0 6.5 7.5 8.5 Indonesia 6.3 6.1 3.5 5.0 6.0 Thailand 4.9 2.7 -3.2 2.2 3.1 Europe and Central Asia 6.9 4.0 -4.7 1.6 3.3 Russia 8.1 5.6 -7.5 2.5 3.0 Turkey 4.7 1.1 -5.5 1.5 3.0 Poland 6.7 4.8 0.5 0.9 3.5 Latin America and Caribbean 5.8 4.2 -2.2 2.0 3.3 Brazil 5.7 5.1 -1.1 2.5 4.1 Mexico 3.3 1.4 -5.8 1.7 3.0 Argentina 8.7 6.8 -1.5 1.9 2.1 Middle East and North Africa 5.4 6.0 3.1 3.8 4.6 Egypt g 7.1 7.2 3.8 4.2 5.0 Iran g 6.2 6.9 2.5 3.0 4.0 Algeria 3.0 3.0 2.2 3.5 4.0 South Asia 8.4 6.1 4.6 7.0 7.8 India g 9.0 6.1 5.1 8.0 8.5 Pakistan g 6.4 5.8 1.0 2.5 4.5 Bangladesh g 6.4 6.2 5.0 4.5 5.0 Sub-Saharan Africa 6.2 4.8 1.0 3.7 5.2 South Africa 5.1 3.1 -1.5 2.6 4.1 Nigeria 6.3 5.3 2.9 3.6 5.6 Kenya 7.1 1.7 2.6 3.4 4.9 Memorandum items Developing countries excluding transition countries 8.2 5.9 1.9 4.7 5.9 excluding China and India 6.1 4.5 -1.6 2.5 3.9 Source: World Bank. All forecasts and databases for the Global Development Finance 2009 report were frozen on June 5, 2009. *The latest country forecast for China (as of June 18, 2009) is available in the China Quarterly Update. Note: PPP = purchasing power parity; e = estimate; f= forecast.a. Canada, France, Germany, Italy, Japan, the UK, and the United States.b. In local currency, aggregated using 2000 GDP Weights.c. Simple average of Dubai, Brent and West Texas Intermediate.d. Unit value index of manufactured exports from major economies, expressed in USD.e. GDP in 2000 constant dollars; 2000 prices and market exchange rates.f. GDP measured at 2000 PPP weights. g. In keeping with national practice, data for Egypt,  Iran, India, Pakistan and Bangladesh are reported on a fiscal year basis. Expressed on a calendar year basis, GDP growth in these countries is as in the table on the right. 2008e 2009f 2010f 2011f Egypt 6.7 5.1 4.2 4.6 Iran 6.9 2.5 3.0 4.0 India 7.3 5.9 8.1 8.5 Pakistan 6.1 3.3 1.8 3.5 Bangladesh 6.3 5.6 4.7 4.8

September is Back to School Month and aside from reviewing tax breaks for tuition, education and textbook amounts, students and their supporting individuals will want to think about withdrawals from an RRSP under the Lifelong Learning Plan as an alternative to going into debt to fund school costs. Here's what you need to know: Using the RRSP for School Funding: The Lifelong Learning Plan allows a taxpayer to withdraw (under S. 146.02) up to $20,000 of funds saved within their Registered Retirement Savings Plan (RRSP) for the purpose of furthering their education or the education of their spouse or common-law partner, on a completely tax-free basis. The withdrawal limit is $10,000 per year. No tax will be withheld on such withdrawals. The withdrawals may be a single amount or the taxpayer may make a series of withdrawals as long as the total does not exceed $20,000. Funds are withdrawn from the RRSP using Form RC96 Lifelong Learning Plan (LLP) Request to withdraw funds from an RRSP. The funds must be repaid back into the RRSP, over a period not exceeding 10 years, beginning in the fifth calendar year after the withdrawal or the year after the student ceases to be a full-time student for at least three months in the year, whichever comes first. Amounts which are due and not repaid are included in the taxpayer's income under S. 56(1)(h.2) in the year they are due. Taxpayers are free to participate in the plan again once they have repaid the amount borrowed. Using the Tuition Fee Amount: Here is a review of the basic definitions for non-refundable credits and what qualifies for the tuition credit and education amounts: DEFINITIONS IN BRIEF: Non-refundable tax credits available to post-secondary students and their supporting individuals include the following: Amounts for Tuition: Post-secondary students may claim the tuition amount under S.118.5 of the Income Tax Act. Amounts for Education Costs: A monthly education amount available under S.118.6 Amounts for Textbooks: A monthly credit for such costs is specified under S. 118.6(2.1). Transfers to Supporting Individuals: Students must claim the above amounts first on their return. If the student is not taxable, the claim for the tuition, textbook and education amounts may be transferred from a student to the supporting individual under S.118.81 or may be carried forward to future years for use by the student. NOTE: KNOWLEDGE BUREAU SELF STUDY COURSES QUALIFY! Next Time: Which tuition fees are eligible? Educational Resources:   Taking the Knowledge Bureau's certificate course Introduction to Personal Tax Preparation Services is a great way get your start earning a second income as a tax services specialist. See www.knowledgebureau.com for more information on our courses and how to enroll.

The federal government has just released two new forms to help advisors and their clients calculate excess RRSP contributions and their 1% per month penalties. To view the new forms, link to them here - T1-OVP and T1-OVP-S. RRSP contributions in excess of the $2,000 (or those in excess of contribution room for taxpayers under 19) are subject to a penalty of 1% per month on the excess. A complicated form called a T1-OVP must be completed in that case and the penalty must be paid by March 31 of the year following the cumulative excesses. Penalties will accrue until the excess contributions are withdrawn from the RRSP. It's important to remove those contributions, because you'll want to avoid double taxation upon later withdrawal (that is, you want to make sure you got a tax deduction for any contributions that will later be taxable). Paying a professional to reverse the excess can be expensive too, because the forms are a time-consuming, complicated headache. Here's what you need to know when you contribute too much to your RRSP: 1.  When the Contribution occurs<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" /> 2.  The amount over the allowed overcontribution limit of $2000 (Note if under 18 no overcontribution limit is allowed) 3.  The amount of excess contribution (amount over $2000) x # months x 1% per month = penalty 4.   When to calculate penalty (payment is due March 31) 5.  How far.back you need to go (taking into account new RRSP room every January) . . 6.  How to withdraw overcontributions 7.  How to withdraw excess contributions Bottom line: tax and financial advisors get your RRSP contributions rightóover- and excess-contributions are expensive. For all the information on this subject including access to all RRSP contribution, withdrawal and excess contribution forms, subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

Employers - with so many summer students leaving their jobs to head back to school, it's time to brush up on the rules related to "interruption of earnings" or what is more commonly referred to as a "termination of employment".   A record of employment (ROE) form is required by the government once an employee has a break in employment. The government uses the information on the ROE to determine whether a person qualifies for EI benefits, the benefit rate and the duration of his or her claim. An ROE must be issued by an employer even if the employee has no intention of filing a claim for EI benefits. An interruption in earnings could be due to the employee's quitting or the employer terminating the employment, but only arises if it involves or is expected to involve 7 consecutive calendar days without work or insurable earnings from the employer. An interruption of earnings also occurs where a salary falls below 60% of normal earnings due to illness, injury, quarantine, pregnancy, the need for a parent to care for either newly born or adopted children, or the need to provide care or support to a family member who is gravely ill with a significant risk of death. Special rules apply to casual workers. When a part-time or casual worker has not worked for 30 days, is no longer on the employer's active employment list or the employee or the government requests an ROE form, a form must be completed by the payroll department. FINAL PAY Other than vacation pay and severance, an employee may be owed other amounts. The employee may earn incentive based bonuses through the course of employment. If an employee terminates, a prorated bonus amount may need to be calculated. If an employee terminates and does not work out the notice period, then pay in lieu of notice is paid if it is the employer's decision to not have the employee work out this time. If the employee fails to complete the proper notice period, then the employer is not normally required to pay this amount to the employee. These rules vary by province and therefore it is important to refer to provincial labour standards for the correct notice period rules. An employee may owe amounts at the time of termination to the employer for a health plan, an RRSP plan or donation plan or any similar arrangement. These amounts must be deducted from the final pay. A termination checklist is useful in helping the payroll department to determine that all payments and all deductions are captured for the final pay. It can also be used to ensure that all internal policies relating to a termination have been complied with. When an employee is terminated a termination letter is usually prepared by the payroll or human resource department which outlines the reason for the termination, monies owing to the employee and continuation of any benefits or other coverage. The letter should also describe any non-competition agreement terms and any other actions required by both the employer and the employee. An employee may or may not work their notice of termination period ñ the period from the announcement that employment is terminated until the last day of work. As noted above, if an employee chooses not to work their notice period, the employer generally does not have to pay the employee for the notice period. On the other hand, if an employer chooses not to have the employee work out their notice period then the employer must pay the employee for this period. As mentioned earlier in the course, this payment is referred to as "pay in lieu of notice". Notice period rules vary by province and can be found in provincial labour standards. Educational Resources: Excerpted from Advanced Payroll for Professional Bookkeepers,  one of the courses that comprise the Bookkeeping Services Specialist program.

The CRA has announced that they have revoked the charitable registration of a Toronto based charity, The Mission Against Poverty Shelter.  The charity allegedly issued receipts for transactions that didn't qualify as gifts, and failed to maintain proper records to support its activities.    With tax freedom day finally behind us, many Canadians start working for themselves and their communities in the summer months. But be aware of where you are donating your time and money, as numerous charities have had their charitable status revoked in the last year due to non-compliance with the rules for maintenance of their registration.    Last year the CRA revoked the status of 38 charitable organizations, after auditing 845 charities, for serious infractions and this trend is continuing in 2009.  Many other charities lost their status after failing to file their annual returns.  Once an organization has their charitable status revoked it can no longer issue official tax receipts for donations and it is no longer a qualified donee under the Income Tax Act.   Some reasons that CRA will revoke a charity's status include the following: lack of control over spending of charitable funds poorly maintained books and records issuance of tax receipts in excess of gifts received failure to meet charitable activity spending requirements   Following is an excerpt from the Tax Efficient Retirement Income Planning Course, providing some insight on the giving qualities of Canadians as a whole: Facts on Canadian Philanthropy 5.7 million Canadians contributed $6.9 billion to charitable organizations in 2006. Statistics Canada reported that the total market value of stock held by Canadians at the end of 2006 was $1.4 trillion, an increase of $100 billion over the previous year Approximately one-half of that market value represents unrealized capital gains, suggesting that the opportunity for many shareholders to donate stock and save tax is very significant. TD Economics estimates that the market value of stock held by Canadians in 10 years' time could exceed $3 trillion, with as much as two-thirds of that in unrealized gains. Demographic Trends Potential for philanthropy is immense: In Canada, between $15 and $20 trillion is expected to shift from parents to their children between now and the middle of the century. Baby boom generation is having significant impact on the world of charitable giving: not content to simply write a cheque and move on, donors expect transparency and accountability - they want to be involved. Many charities are revisiting the way they operate in order to attract these younger philanthropists. General Rules At some point during the year many Canadians give to charities. Those gifts, usually of money, will be claimed on Schedule 9 of the tax return. Unclaimed donations from the previous five years may also be claimed in the current year. Donations made through payroll deductions should also be claimed. These will show on the T4 slip. Generally you can claim all or part of your total donations, up to a limit of 75 percent of your net income reported on line 236. For the year a person dies and the year immediately prior, this limit is 100 percent of the person's net income. It is generally most beneficial to claim donations made by both spouses together on one tax return. This is because the first $200 of donations is eligible for only a 15 percent tax credit, while any additional donations attract a tax credit of 29 percent. Combining donations will ensure the couple is subjected to the 15 percent limit on the first $200 only once, not twice. Donations made during the year do not have to be claimed on that year's return and may be carried forward to a subsequent year, up to five years. This may be of benefit, if, for example, you already have sufficient non-refundable tax credits to completely eliminate taxes payable. So remember, only donations made to Canadian registered charities and other qualified donees may be claimed. A registered charity will show its charity registration number on the receipt. The slip must also indicate the Web address of the CRA. Click here for more information on the Tax Efficient Retirement Income Planning Course and to register in the Retirement Income Specialist program.